Company car tax question
 

All

With a potential job change, I might opt for a company car. It'd suit me from a depreciation point of view because I do inter-gallactic mileage. I understand how the tax liability is worked out but when you get a figure of say, £170 per month, does that mean:

- that's the net figure coming out of your pocket or
- do you pay 40% of that figure (assuming you're a higher rate payer)?

Cheers
Kav

Once you've got the taxable value you then pay 40% of that.

E.g. My car is worth £20,000 and falls into the 15% tax bracket based on CO2 emissions. Therefore the taxable (P11D) value is £3000. I pay 40% tax on that which is £1,200 per year or £100 per month. i.e. I'm £100 per month worse off for taking the car.

However if I didn't have the car I would get £450 per month (gross) car allowance. This would then be taxed at 40% meaning I would be £270 per month better off.

Therefore the total out-of-pocket cost of the car is £370 per month. (which for me is a good deal)

Hope that helps.

Steve.

Kav, if the £170 per month is the tax liability then thats what you pay out of your gross salary

If the £170 per month is the taxable benefit value, then the tax you pay is £40% of that figure.

BTW, a taxable benefit of £170 pm or £2,040 per annum would equate to a car worth £13,600 with a 15% tax bracket.

So unless you've got a very inexpensive and low emission car, I'm guessing the £170 pm is what you would be paying in tax.

Roughly, a WRX STI will cost a higher rate tax payer £300 per month in tax

Thanks chaps!